Indirect Taxes in the European Union (Hansard, 26 July 1994)

§ The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley)
My Lords, the Government do not believe it is necessary to harmonise indirect taxes within the European Union.

§ Lord Barnett
My Lords, I find that Answer interesting. I assume that the Minister is aware that the Government are committed under Article 99 of the Treaty of Rome to the harmonisation of indirect taxes. Will he accept that the present situation of the huge variation both in duties and indirect taxes among member states is something of a nonsense in the management of a single market? Does the Minister recognise —I am sure he does—that at the end of this year the Commission is scheduled to introduce a report on VAT under which some member states are in favour of moving from a VAT system based on the country of custom to the country of origin? Can he say what is the Government's position on that matter as well as on the others?

§ Lord Henley
My Lords, the noble Lord is right to draw attention to Article 99 of the treaty, which places an obligation on the Council unanimously to adopt provisions for harmonisation of legislation concerning VAT and excise duties but—and here is the rider which the noble Lord did not mention to the House—only to the extent that it is necessary to ensure the establishment and functioning of the internal market. I do not believe that the variations in both VAT and excise duties are necessarily a hindrance to the establishment and good functioning of the internal market.
As regards what is happening later this year, I should just like to say to the noble Lord that at present we are developing our policy in these areas ahead of the Commission's reports which are expected in the 595 autumn. I think that the noble Lord would probably prefer to wait until the autumn for my response on those matters.

§ Lord Stewartby
My Lords, will the Government be more robust in dealing with the abuse of the right to import drinks from across the channel supposedly only for personal consumption? This abuse is not only costing other taxpayers a great deal of money but is certainly disadvantageous to British producers.

§ Lord Henley
My Lords, I do not believe that it is necessarily disadvantageous to British producers. There is possibly a valid argument that it could be damaging to a certain number of retailers in this country, but to argue that it is damaging to producers is another matter. We are robust; we have been robust; and we have certainly apprehended a number of people who brought in more in the way of spirits or other liquors than they need for personal consumption. I can give an assurance to my noble friend that we shall continue to pursue a robust line in that area.

Lord Bruce of Donington
My Lords, will the noble Lord give an undertaking that the Government will resist the superficial attractions of harmonisation in these matters which is much beloved by bureaucrats everywhere? Will he give an assurance that he will fight every endeavour that is made, either by qualified majority or by other pressures, to increase the rate of indirect taxation in this country?

§ Lord Henley
My Lords, the noble Lord would not expect me to comment on matters that are quite properly the responsibility of my right honourable friend the Chancellor of the Exchequer. However, I can give the noble Lord an assurance that we will seek harmonisation where it is necessary to ensure the functioning of the internal market. That is something we believe in. But we will not seek harmonisation where it is not necessary for such purposes.

§ Lord Rees
My Lords, will my noble friend say what proportion of the goods and services traded in this country is subject to VAT and how the position compares with that in other major European Community countries?

§ Lord Henley
My Lords, without notice I am afraid that I cannot answer my noble friend's question. I rather wish that he had given me notice of his question because I suspect that the variation would be a fairly large one, as I think my noble friend would like to point out to the House.

§ Lord Tordoff
My Lords, can the noble Lord tell us what form the robustness will take and how much it will cost? And please will he delay it until after 12th August when I return from France?

§ Lord Henley
My Lords, I am grateful that the noble Lord declares an interest in these matters. All I can say is that Customs and Excise will continue to pursue all those who are trying to import more than they need for personal consumption. I appreciate that the noble Lord will need very little for his own personal consumption, and I shall advise those officials in Customs and Excise 596 to pursue the noble Lord if he has more than the very little that we believe would be necessary for his personal consumption.

§ Lord Ezra
My Lords, the noble Lord indicated that the Government would look at the harmonisation of indirect taxes only to the extent that they impeded the activities of the single market. Have the Government worked out what proportion of indirect taxes might fall into that category?

§ Lord Henley
My Lords, what I was trying to make clear is that under Article 99 our obligation is to seek harmonisation—that is a matter for unanimity—but only to the extent that it is necessary to ensure the establishment and functioning of the internal market. What proportion of goods and services that would necessarily cover and what degree of harmonisation is needed are matters for argument. I am not sure that I should like to speculate in giving a precise answer to the noble Lord.

§ Lord Cocks of Hartcliffe
My Lords, would the Minister care to suggest to the brewers that instead of whingeing and lobbying all the time about the import of these drinks they would be better serving the community by looking at their own profit margins and at the automatic increases they slap on before every Budget?

§ Lord Henley
My Lords, I do not speak from the Dispatch Box for the drinks industry. I speak for Her Majesty's Government. Our duty is to raise the necessary taxes on drinks that are felt appropriate. As I said earlier, we shall pursue those who are trying to import more than is necessary for their own personal consumption.

§ Lord Eatwell
My Lords, is the Minister aware that the official journal of the European Communities for 5th July this year refers to a series of reports and propositions which are being advanced with respect to the revision of the VAT and excise duties system? I accept that the noble Lord will not want to discuss the substance of any propositions that Her Majesty's Government are advancing, but can he tell us what principles are guiding their proposals on the revision of VAT in the European Community? Can he say how far Her Majesty's Government's proposals reflect the Chancellor of the Exchequer's stated view that we exempt far too many goods and services from VAT in this country?

§ Lord Henley
My Lords, on the noble Lord's first point, I do not think that I need go further than my response to his noble friend Lord Barnett. We are awaiting the reports from the Commission. They are expected in the autumn. At that stage —the noble Lord will have to wait for that stage—we shall comment. As regards the noble Lord's second point, I think that he has to some extent given a misinterpretation of what my right honourable friend was saying when he stated that a wider array of goods and services might possibly be subject to tax. He was talking purely speculatively about 597 what might be the position if we were not where we are now. But he did stress that we are where we are now. Therefore, the matter was purely speculative.

§ Lord Barnett
My Lords, perhaps inadvertently the Minister did not reply to the original Question on the Order Paper asking how the Government propose to achieve harmonisation. When they have reached a conclusion, and before they put it to the European Union, will they come to your Lordships' House and debate it with us so that we shall know in advance what the policy will be?

§ Lord Henley
My Lords, the noble Lord tells me what his Question on the Order Paper is. He said that it asks how we intend to achieve harmonisation. With all due respect, the noble Lord's Question asks, what is their policy towards achieving harmonisation". I answered that. I said that we do not believe that it is necessary to harmonise indirect taxes within the European Union and I then went on to give reasons. If the noble Lord would like a debate on these matters I will pass on that message to the appropriate authorities. I would be more than delighted to debate them with the noble Lord at greater length than is possible at Question Time.